2025: Year of chaos and gains

Although global markets gained in 2025, Asian and particularly European markets strongly outperformed US markets. Despite US indices hitting all-time-highs by year-end, a number of factors drove a break from American market dominance, particularly a weaker US dollar, but also attractive valuations outside the US and a rotation by some investors away from US technology stocks. Overall, equity markets were also supported by solid earnings growth, easing inflationary pressures and expectations that major central banks, particularly the US Federal Reserve (Fed), would continue to lower interest rates in 2026.

The main news of the year were of course the Trump tariffs which were announced in early March, rattling the markets into a steep but short-lived 1-month global market correction. Soon however it became crystal clear that Trump's tariff decisions were not reliable at all. After multiple hikes, reductions, delays and new tariff threats, his decisions became more based on personal grudges, or in response to political critics. The tariff decisions were also made without congressional approval and justified as a »necessity for national security«, the same excuse Trump is using now to lay claim on Greenland  or for the kidnapping of Venezuelan president Maduro.

When Trump was inaugurated in January 2025 as the 47th president of the United States, it was fairly predictable that chaos would begin to ensue, just as was the case during his first term. The dollar weakened a staggering 13,5% against the Euro. Gold dominated the headlines as international central banks continued to diversify their reserve holdings and gold exchange-traded funds saw strong inflows. That combined with the tariffs and other geopolitical uncertainties made 2025 a fantastic year for precious metals, which is what investors flock to as a form of safe haven. Gold achieved new record high on a frequent basis and added a 66% gain to nearly 4400 dollars per ounce through the year. Silver even added a 166% gain.

Even though the Dow Jones gained 13%, the S&P500 gained 16% and Nasdaq gained 20%, most of those gains were neutralized by the loss of the dollar. In Euro terms the Dow Jones index even dropped 0,4% in 2025, despite reaching a record high in dollar terms. In Euro-terms the S&P500 gain was reduced to just 2,6% and Nasdaq gain was reduced to 5,9%. 2025 was the first time in 20 years that the S&P 500 was the worst performing major equity market.

By comparison the German DAX gained 23% and United Kingdom's FTSE gained 21,5% in 2025, far outperforming US indices. One of the top-performing countries however was Slovenia with the SBITOP index gaining a staggering 50% in 2025.

In Asian markets the Hong Kong Hang Seng index gained 12,4% in Euro terms and Japanese Nikkei gained 11,6% in Euro terms despite the Yen depreciating 13% against the Euro. Advances in homegrown Chinese AI boosted the tech sector, while efforts to diversify trade relationships meant that China’s exports were resilient despite US tariffs. In Japan, hopes for continued reflation were boosted by the election of Prime Minister Takaichi, with markets factoring in the likelihood of greater government spending.

Macroeconomically the US recorded modest GDP growth but the labor market is grinding to a halt with hardly any new jobs being added and the unemployment rate slowly but certainly ticking up and heading towards 5%. By year-end the Federal Reserve cut the interest rate three times by 0,25% as labor market concerns are gaining traction. Further FED rate cuts are expected in 2026. The European Central Bank on the other hand has stopped cutting its interest rate in the summer of 2025 as inflation is at its target rate of 2 percent. Also the Eurozone had positive GDP growth which shows further improvement but is still modest between 1% and 2%. Unlike the United States, the Eurozone's macroeconomic picture is much more stable despite Trump's tariffs.

One of the few losers of 2025 was the oil price which even dipped below 60 dollars per barrel in December on perceived oversupply. That's why we at Primorski skladi see it as a buy opportunity, expecting a gradual turnaround as OPEC+ is expected to halt further production increases and geopolitical issues are expected to continue in 2026 (Venezuela, Iran, Russia...). We also expect the pharmaceutical industry to gradually turn around as the sector has been underperforming since the COVID pandemic ended, making current valuations quite attractive. As for AI-related stocks, unlike 2024 where everything AI-related soared, it's becoming harder to pick winners as questions have arisen whether the massive investment in AI will actually pay off and valuations are very steep. Only two of the »Magnificent Seven« tech companies outperformed the S&P 500.

All in all 2025 was yet another succesfull year, despite the unwelcome chaos from the Trump presidency. At Primorski skladi all of our funds achieved double-digit gains over the year with PSP Modra Linija and PSP Živa achieving gains of even more than 20%. That said, we do expect gains in 2026 to be more modest, expecting general gains of 5% to 10% as we follow a cautious investment strategy with overweight in value stocks with attractive dividend yields.

Wishing you a happy, healthy and successful New Year from all of us at Primorski skladi.

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